WHAT CAN I DO IF THERE IS A MISTAKE IN MY CONTRACT?
Utah Contract Law About Mistake Generally
Generally, a party is bound to the terms in a written contract. However, contract terms may be voided for some limited reasons, such as duress, fraud, and mistake. The doctrine of mistake is available to enact the intent of the parties and prevent injustices. It is not available in situations in which one party simply neglects to understand its agreement.
In evaluating contractual mistakes, courts look to situations “where the terms of the written instrument are mistaken in that they do not show the true intent of the agreement between the parties.” F.D.I.C. v. Taylor, 267 P.3d 949, ¶47 (Utah App. 2011). In the event of an applicable mistake, the remedy available is contract reformation. “Reformation is an equitable remedy that permits the court to add new terms to a deed or alter the original language of a deed to conform to the parties’ intent.” F.D.I.C. at ¶45.
“A mutual mistake occurs when both parties, at the time of contracting, share a misconception about a basic assumption or vital fact upon which they based their bargain.” Robert Langston, Ltd. v. McQuarries, 741 P.2d 554, 557 (Utah App. 1987). Commonly, the doctrine of mutual mistake simply corrects scrivener’s errors. For example, the party drafting the agreement may have accidentally omitted the word “not” from an important provision or accidentally typed an extra digit in a purchase price.
A unilateral mistake exists when the contract is contrary to one party’s intent and/or understanding. Usually, “a contract will not be reformed for a unilateral mistake.” Davis v. Mulholland, 475 P.2d 834, 835 (Utah 1970). For a unilateral mistake to be of legal significance, there must be “ignorance or mistake by one party, coupled with fraud by the other party.” RHN Corp. v. Veibell, 2004 UT 60, ¶ 36 (Utah 2004). A unilateral mistake justifying reformation exists “if one party is laboring under a mistake about a contract term and that mistake either has been induced by the other party or is known by and conceded to by the other party, then the inequitable nature of the other party’s conduct will have the same operable effect as a [mutual] mistake, and reformation is permissible.” Briggs v. Liddell, 699 P.2d 770, ¶8 (Utah 1985).
Create a New Agreement
Proving a mistake may be difficult and costly through court. If a contract has a mistake, the easiest solution may be to create a new agreement that better reflects the intent of the parties. In creating the new agreement, each party should make sure it is explicitly stated that the new agreement is correcting a mistake in the old agreement. To be safe, the new agreement could also allow each party to receive new, additional consideration. Utah courts have struck down new agreements that merely restate parties’ presently existing obligations under old agreements and do not provide something new of value to each party.
For more specific information about this particular subject, please call my office at 801-691-7770 for a free consultation or see the following web pages:
- Whiting & Jardine, LLC Home Page: www.WhitingJardine.com
- Sales & Purchase Agreements:http://whitingjardine.com/practice_areas.php?part=purchase
- Contract Negotiation and Drafting: http://whitingjardine.com/practice_areas.php?part=contract
- Breach of Contract Litigation: http://whitingjardine.com/practice_areas.php?part=breach
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